RBI raises provisioning requirements for banks' sub-standarad loans

19 May 2011

1

Banks will have to make a provisioning of 15 per cent on all advances classified as "sub-standard" against the 10 per cent required under existing norms.

The "unsecured exposures" classified as sub-standard assets will attract an additional provisioning of 10 per cent, ie, a total of 25 per cent as against the existing 20 per cent, the Reserve Bank of India (RBI) said in a notification today.

However, "unsecured exposures" in respect of infrastructure loans classified as sub-standard, wherein certain safeguards such as escrow accounts are available, will attract an additional provisioning of 5 per cent only, ie, a total of 20 per cent as against the existing 15 per cent.

Doubtful loans that are not covered by the realisable value of the security to which the bank has a valid recourse and where the realisable value is estimated on a realistic basis, will continue to attract 100 per cent provisioning to the extent of the advances.

However, the secured portion of advances which have remained in "doubtful" category up to one year will attract a provisioning of 25 per cent as against the existing 20 per cent.

The secured portion of advances which have remained in "doubtful" category for a period of one to three years will attract a provisioning of 40 per cent as against the existing 30 per cent.

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